Baribeau to Speak at Casualty Actuarial Society’s Annual Meeting

This Tuesday, I will be speaking at the Casualty Actuarial Society’s Annual Meeting on November 10, 2020. During the presentation,” COVID-19: The Good, The Bad and the Ugly,” I will be looking at the insurance risks and opportunities that could result from the coronavirus.

Some of my remarks will be based on articles I have written recently, including:

My main point is that COVID-19 is the ultimate mega disruptor that should challenge the insurance industry to re-think its products and services and their relevance in a post-COVID-19 world. We continue to learn from COVID-19. I expect teleworking will continue on a large scale after the coronavirus becomes history not only for worker convenience but the environmental advantages. That alone raises implications for workers’ compensation, personal auto and homeowners insurance. Telemedicine is also proving to help patients without long waits at the doctor’s office, but there are liability questions to explore that will affect medical malpractice insurance.

I am honored to be part of the CAS’s Annual Meeting and to be presenting with Jim Lynch from the Insurance Information Institute.

There are also a couple of actuaries I want to thank for making this presentation possible. Beverly Phillips, a personal auto actuary, was kind enough to ask me to present. Max Rudolph, an Enterprise Risk Management actuary from the life and health side of the actuarial house, also provided invaluable assistance.

 

 

 

 

 

 

 




Commercial Property Insurance in Peril

Commercial property insurance was already struggling before COVID-19 hit the scene. Double-digit rate increases were bad enough but hit the highest in 35 years. 

As I cover in Actuarial Review’s article, Perilous Times: COVID 19 & Vexing Variables, there were several things going on. Consider:

  • Catastrophic weather-related losses have been exceptionally high – at least for the years 2017 and 2018.
  • Thanks to the response to the COVID-19 pandemic, commercial space has been at low capacity for seven months. 
  • Declining investment income due to lower returns on mortgage-backed securities.
  • Riots similar to the late 1960s have made a comeback – big time.

I wrote the commercial property insurance article before a multitude of hurricanes hit the United States, especially in the Gulf states. While the article focuses on commercial property insurance, it should also interest homeowners’ insurance policyholders as well.  

My thoughts on “Civil Unrest”

As an aside, I found it distressing that last summer, some people said it was OK to destroy buildings because that is not harming people. It depends on how someone perceives harm. Small business people who lose their companies and their employees who lose jobs feel harm. So do the neighbors. People have been physically harmed or even killed. Businesses that hang on despite the damage still have to pay deductibles for their commercial property insurance. Their premium can also go up.

By the way, if civil unrest sounds like rioting, then you need to get current. The Associated Press Style manual recently instructed journalists to avoid using “riot” as a term. “A riot is a wild or violent disturbance of the peace involving a group of people. The term riot suggests uncontrolled chaos and pandemonium, according to the AP Stylebook’s twitter feed. Apparently, the act of going into someone else’s neighborhood, stealing property and destroying buildings could be stigmatized like the protests of the 1960s. “Unrest is a vaguer, milder and less emotional term for a condition of angry discontent and protest verging on revolt,” tweets the AP Stylebook

Whatever it is called, I wish the Golden Rule would make a comeback. Treating people the way we want to be treated with kindness, dignity and respect would go a long way. Sounds like Martin Luther King doesn’t? 

 

 

 

 

 

 

 

 




Climate Change Pressures Higher Property Insurance Premiums

Climate change is already pressuring premiums for homeowners, commercial and other types of insurance coverage. California homeowners in wildfire-prone areas are being turned down for coverage. The National Flood Insurance ProgramClimate Change

(NFIP) will be increasing premiums this spring.

My article in the January issue of Leader’s Edge, Climate Appetite, explains why businesses should consider the change in climate seriously to mitigate future risk. The piece also covers the important role insurance agents and brokers will play to support their clients.

There is also an overview of catastrophic losses and their impact on insurers.

Whether you believe global warming will cause serious changes to the earth’s environment — or not  — the story should be a wake-up call. Businesses need to take a harder look at their properties. Being sustainable could mean relocating, reinforcing buildings or taking maintenance and repair more seriously. 

Making these investments now is a good idea. Besides protecting business personnel and property, it could keep insurance premiums in check.

After reading my latest Leader’s Edge article, please check out my Actuarial Review articles relating to weather and insurance.

  • Risky Business explains why climate change has become the top risk of concern for actuaries and risk managers.
  • 2017: The Year of the CATs, discusses how extreme weather made 2017 the highest loss year for losses, bypassing 2005 of Hurricane Katrina fame.
  • The SLR Factor covers why sea levels are on the rise. It also explains why actuaries should consider the impact of rising sea levels when developing rates for pricing property insurance. 

 

 




Generation Z Looks to People for Complex Insurance Interactions

Generation Z, which presumably embraces digital everything, also likes the human touch when dealing with insurance companies.

Generation Z

Generation Z wants more than digital interaction with insurers.

Born from about 1996 to 2015, the oldest of the digital native generation is beginning to buy their own personal lines insurance. And they have been around the digital block. As my recent Actuarial Review article, Coming of Age: How will Gen Z Impact Personal Lines Coverage? explains, constant exposure to social media, digital marketing, clickbait and fake news has created a deep hunger for authenticity and transparency. 

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For many, finding trust and credibility means doing business with insurance professionals. At least half of Gen Zers purchasing auto, renters or homeowners insurance, surveys show, seek out insurance agents or customer service representatives for help. This is especially true for complex insurance transactions, such as purchasing coverage or filing a claim. 

The article also specifies why Gen Z is different from previous generations. It explains how generational differences have vast implications on insurance product development, pricing, marketing and communication. While researching for the article, I found that Gen Z does expect insurers to offer multichannel, 24-7 access. 

However, surveys and interviews hint that the digital natives might not be as quick to purchase simplified insurance through icons and a few clicks as much as insurtech investors hope. Rather, Gen Z seeks insurance for security. Digitally jaded to some exent, they want to build trust with people who represent brands.   

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Gen Z seeks insurance for security.
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Retailers are also finding that Gen Z does not necessarily embrace online shopping. Gen Z will start the process online to collect information. But ultimately, they prefer to shop at brick-and-mortar stores, according to the National Retail Foundation

This reminds me of a hilarious Bad, Bath and Beyond online commercial that introduces the concept of offline shopping. “It’s like online shopping but in real life.” 

Reaching Generation Z

Smart insurers will find the right balance of reaching Gen Z by offering both digital and human interaction. Online, they will blend both traditional and simple iconic elements with language that educates consumers without compromising meaning. 

Progressive’s website is a great example. It presents a traditional navigational look with little scrolling and clickable headlines while offering straight-forward clickable insurtech-inspired icons. Explanations provide enough information to help viewers.

Successful insurers educate their Gen Z customers by straightforwardly presenting information. They hire communicators who get insurance and can explain it simply without marketing flash or dumbing down critical information. 

Finally, I like Gen Zers. As a stay-at-home mom who watched Gen Z grow up, I like that they are smart, pragmatic and refreshingly honest.

Thanks to Actuarial Review

On another note, I was deeply touched and humbled by what Actuarial Review Editor Elizabeth Smith wrote about me in the publication’s current issue. It says:

Thanks to our award-winning author and cover story writer, Annmarie Geddes Baribeau. “She knows insurance, and she also knows actuaries and what they’d like to read.”

Thank you for the opportunity. Actuaries are great fun!




Lessons to Learn from the CATs of 2017

The CATs of 2017 are warning us, will we listen?

The CATs of 2017 are warning us, will we listen?

There is a lot to learn from the weather CATs of 2017. My most recent article, 2017-The Year of the CATs, published recently in Actuarial Review, covers natural catastrophes Hurricanes Harvey, Irma, Maria and last fall’s combined California wildfires. The article also takes a unique look each CAT, showcasing lessons learned and ones yet-to-be learned.

Combined, the 2017 CATs offered unique challenges. For example, insurers experienced higher loss adjustment expenses because the three major hurricanes took place within six weeks. On the positive side, insurers and reinsurers also developed new ways to work together to quickly pay claims.

New insurer efficiencies are great for policyholders. However, the CATs are a reminder of the nation’s chronic problem of the uninsured or underinsured. The major CATs of 2017 cost $306 billion in losses — the largest amount of weather-related economic losses in United States history. Insurers, rather than property owners and the government agencies, could have carried a greater portion of the cost.

Sadly, it is not surprising to see the high percentages of residential properties in hurricane vulnerable areas lacking flood coverage through the National Flood Insurance Program (NFIP). Coverage participation in the federal program has always been a problem. Even when NFIP policyholders and taxpayers help subsidize premiums for affordability, too few still purchase it. To make matters worse, it is common for homeowners insurance policyholders to believe flooding due to weather is covered. Generally, it is not.

Ironically, the wealthy know insurance is a good bet. After last year’s wildfires in California, property owners are rebuilding homes after filing claims at $1 million a piece!

_______________
…there is no negotiating with Mother Earth…
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But there is also a deeper lesson. Experts predict future CATS can be more damaging and dangerous. Since there is no negotiating with Mother Earth, it is time for some tough love. Building in potentially dangerous areas must stop.

Consider Hawaii’s Big Island this year where paradise turned to a fiery hell. Hedging their bets, people built in harm’s way despite warnings. As a generous lot, Americans rightly open our hearts and wallets to help victims. Now they need to live on safer ground. Financially helping property owners in vulnerable areas to move is one possibility. While the idea makes me wince for several reasons, the big short-term cost would save lives and promises to be less expensive in the long term.

Broadening Sustainability

As my Actuarial Review article concludes, the CATs of 2017 call us to prepare for the CATs of tomorrow.

Beside relocating people from vulnerable areas, I believe the CATs of 2017 should also mean broadening the definition of environmental sustainability to include building structures that will last the test of time. The environment will be better off when we reduce the use of the earth’s resources for rebuilding in CAT-vulnerable areas.

Accused of being an idealist, I see a potential future when a home’s value is not about landfill-bound luxuries, but its structure for strength and sustainability. A “smart home” could mean residential structures built to withstand the test of time rather than those featuring technological Internet of Things gizmos that can increase vulnerabiilty to another risk: cyber attacks

It can be done. Changing the American mindset towards littering and recycling en masse is one example. Growing up in the 1970s, I remember people thoughtlessly threw their garbage out of their car windows. Highways, once lined with nasty debris, are much cleaner now thanks to public awareness and fines for littering. Recycling was considered a huge bother 25 years ago but now Americans do it without giving it a second thought.

If awareness can inspire people to stop littering and start recycling, then it is possible to change the perception of what makes a home valuable. Changing perception requires a consortium of citizens, insurance companies, politicians and governmental agencies that can wield an effective public awareness campaign. By saving lives, the environment and money, the effort would be worth it.

 

 

 

 

 

 

 

 

 

 

 

 




Insurers Begin to Include Rising Sea Levels into Rates

Rising sea levels threaten coastal properties.

Damage from Hurricane Matthew

Insurers are beginning to introduce rising sea levels into rates, according to my latest article, “The SLR Factor: As sea levels rise, the flood risk equation changes.” It was published recently in the Casualty Actuarial Society’s Actuarial Review magazine.

The National Flood Insurance Program (NFIP), the nation’s largest insurer of homeowners’ flood insurance, is beginning to factor in sea level rise. So are excess insurers and reinsurers. However, rising sea levels could also affect the appetite for private homeowners insurers looking to compete with the NFIP. 

While the “21st Century Flood Reform Act” is yet to pass, the omnibus budget bill signed by president Trump last Friday allows NFIP’s reauthorization. The controversial budget bill gives the Federal Emergency Management Agency (FEMA) a necessary financial boost for mapping and mitigating flood risk.

Rising Sea Levels: The Reality

For the scoffers who do not take rising sea levels seriously, consider places such as New Orleans where land is subsiding. Or Norfolk, Va. where rising king tides flow onto nearby streets. A single drop of rain, by the way, does not cause these tides. Instead, they happen when the earth makes its predictable pull with the sun.

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“too many properties not covered for weather-related flood damage.”
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What are the implications for rising sea levels?

  • Covering homes and businesses near the East and Gulf coasts will become more expensive.
  • Some owners will likely have to abandon their property to the tides. This has already happened in New Orleans.
  • Flood exposure will spread, affecting properties once believed to be lower risk. It also means changing weather patterns that will introduce more potential catastrophic weather events.

    Beyond that, rising sea levels will affect governmental entities that need to pony up for expensive flood mitigation. As I write in the article, however, “It is difficult to convince politicians and voters to invest money into problems that are decades away, especially when rising sea levels are too often mired in the politics of global warming.”

Vulnerable Property Owners

Even if sea levels remain stable, there are still too many properties not covered for weather-related flood damage.

Why? Because many homeowners fail to realize that their insurance generally covers flooding caused by something inside the house, such as a leaking pipe. People believe they do not need flood coverage from the NFIP until it is too late. And some irresponsible residents count on FEMA to bail them out instead of buying coverage from NFIP.

And don’t think your property is safe because a FEMA map says so. As I explain in a previous article covering the NFIP, many maps are out-of-date. Further, specific property details can be more critical than zone location.

Rising sea levels will affect more property owners. Insurers are preparing, shouldn’t you?

 

 




Flood Insurance Requires Vision by Congress

Encouraging private carriers to offer flood insurance requires vision.

Encouraging private carriers to offer flood insurance requires vision.

Creating a public/private partnership for flood insurance requires vision by Congress.

That’s my conclusion after writing my latest Actuarial Review article, Legislative Levee.

Unfortunately, there is little time for overall vision when Congress must approve the reauthorization of the National Flood Insurance Program (NFIP) by September 30th. Since my article crystallizes many of the issues concerning flood insurance, my hope is it will encourage greater public policy discussion.

Right now, most homeowners and small businesses can obtain flood insurance only through NFIP. That’s because, in general, private insurers could not profitably offer flood insurance when the NFIP got started in 1969.

Congress began the NFIP not only to provide flood insurance, but to meet specific congressional objectives that are sometimes contradictory. The idea behind the NFIP is to make coverage for weather-related flooding both affordable and available for homeowners, renters and small businesses. Public policy objectives also include reducing the taxpayer burden when the federal government needs to help victims suffering from flood losses.

While criticism of the NFIP abounds, keep in mind that for the past five decades, the NFIP has been better than nothing. Private insurers were also kept out of the market starting in the 1970s. That’s because federally backed home mortgages require purchasing flood insurance from the NFIP when these properties are in a flood zone.

New Developments Inspire Insurers

But now, there is a sizable amount of homeowners insurers that want to offer flood insurance again. The inspiration stems from significant recent developments. Not only do new weather and insurance models show promise of revealing profitable customers, but can also improve upon the NFIP’s more general approach to developing premiums. Reinsurers looking to diversify their portfolios are also willing to back insurance companies.

The implications of introducing private insurers into a market dominated by the NFIP are vast. That’s why changing how consumers can obtain flood insurance requires vision. The potential of Americans being able to have coverage for flooding regardless of cause in and of itself would be a big advantage. Too many Americans simply do not realize they need flood insurance. (This fails a congressional objective of ensuring as many Americans as possible are covered for external flooding.)

One major reason for misunderstanding stems from the maps the Federal Emergency Management Agency (FEMA) produces. (FEMA is the NFIP’s governing agency.) Too many Americans falsely believe their properties are safe if they are not in a FEMA flood zone. However, most homes can fall victim to external flooding for a myriad of reasons. For example, while not in a FEMA flood zone, my first home’s basement flooded when too much rain saturated the ground around my house.

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Too many Americans simply do not realize they need flood insurance.
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In the United States, flood insurance requires vision because entry of the private market would likely change the NFIP’s role. In short, the NFIP could become the market of last resort, thus limiting the agency’s ability to meet congressional mandates.

Currently, the NFIP relies on “profitable” policyholders to help subsidize other customers and reduce the NFIP’s $24+ billion debt to the United States Treasury. If the NFIP losses enough of those policyholders to private insurers, the agency would be hard pressed to meet its congressional mandates.

At the same time, the benefits to customers, including paying rates truer to their actual risk of flooding and being fully covered for flood damage, are too tempting to ignore. The private insurance market could also expand the population of covered property owners. That would help meet the congressional directive of making sure Americans who need flood insurance would have it.

If the NFIP cannot meet its mandates, taxpayers are likely to pick up the costs of paying down the debt to the United States Treasury. (That would kill one congressional directive.) The insurance industry has made it clear it has no interest in subsidizing rates as they do in some states for auto insurance.

Flood Insurance Requires Vision

These are just some reasons why developing a private/public partnership for flood insurance requires vision. My article digs deeper into the public policy objectives for the NFIP, which also must be understood when contemplating a great infusion of private insurers into the external flood market.

There are also several unknowns pertaining to private insurers offering flood coverage. For starters, the profit margins are unclear. Potentially subsidizing risks could mean lowering the profit incentive. The new weather models are largely untested by homeowners and renters insurers in the United States. If major flooding events continue, it could turn out that private insurers will have to raise rates to a point where insurance becomes unavailable once again for too many consumers.

There is also the regulatory conflict. Congress primarily controls the NFIP. Allowing politics to affect the NFIP has led to premium inequities and delay for meeting financial goals. The NFIP could also more greatly benefit from the new weather and insurance models to compete against private insurance companies. However, the agency lacks the agility that private insurers enjoy because it is dependent on congressional timing. Private insurers would be regulated by state insurance regulators, who have much more insurance experience than Congress.

Simply supporting private insurers to compete against the NFIP is does not answer all the public policy considerations that led to to the agency’s existence the first place. The NFIP and insurers would be playing the market game with different rules and requirements.

That’s why flood insurance requires vision to ensure public policy objectives are met as private insurers enter the market. Unfortunately, given the September 30th deadline to reauthorize the NFIP, there is little time for big picture conversations. The nation will likely witness a wait-and-see approach that supports an experiment to realize how private insurers benefit policyholders and taxpayers.

This promises to be messy, but the flood insurance situation is already that way.

To read my article on Hurricane Sandy’s effect on the NFIP, please click here.

 




The Portfolio

THE PORTFOLIO

insurance companies, actuarial firms, brokers, vendors, publications, associations — for more than 15 years, Insurance Communicators LLC, has served virtually every type of insurance industry organization. The published work below demonstrates subject matter expertise. To see specific types of public relations and marketing materials, please contact Annmarie.

Below please find blog posts on our most requested topics and our published work samples.

COMMUNICATIONS/MARKETING

 Click on the link for the archives

INSURANCE TOPICS

 Click on the link for the archives

WORK SAMPLES

Please note: The only work samples I can publish online are my articles. If you want to see samples of web text, advertisement copy, brochures…you get the idea, please contact me directly at annmarie@insurancecommunicators.com. Just let me know what kind of help you need and I will send you samples germane to your project.

Otherwise, enjoy my electronic portfolio! From actuarial to cyber insurance to workers’ compensation to legislation and technical advancements, my articles demonstrate my insurance expertise and commitment to providing unique and well-researched content. Enjoy!

Click on topic below to see our work

Fully Exposed – Leader’s Edge

Employees Want It All With Health Care – Business & Health

Structuring A New Health Plan – HR Magazine

Six Ideas toBoost Productivity– Business & Health

Interview with David Satcher, former U.S. Surgeon General- Business & Health

PEOS Streamline HR Tasks – In Business Las Vegas

FMCA Considers Comments on Minimum Responsibility Limits — AMWINS

The Case for Social Media – Contingencies

Social Media and the Job Search – Contingencies

The TRIA Challenge – Actuarial Review

Workers’ Compensation: Future Turbulence Ahead – Actuarial Review

More Buck for the Bang – Claims Advisor

Workers’ Comp Predictive Modeling – Contingencies

States of Confusion – AIA Advocate

Longshore_Act_Narrative – National Association of Waterfront Employers

The Gathering Storm in Workers’ Comp – Business & Health

The Evolution of Integrated Benefits Delivery in the United States – John Burton’s Workers’ Compensation Policy Report

The Soaring Costs of Workers’ Comp – Workforce Magazine

Workers Compensation Savings Strategies – Workforce Magazine

Workers’ Comp Options Bring LIttle Change – In Business Las Vegas




Facing the Insurance Quality Content Dilemma – Part 2

Reaching Customers Starts with Quality Insurance Content

CC0 Public Domain

Quality insurance content is the foundation for reaching potential markets.

Last week, I wrote about the choice insurance marketing and communications executives often face when looking for public relations and marketing services. They can either rely on insurance subject matter experts who are not effective communicators or public relations and marketing firms that do not understand insurance.

Then the question becomes, how can insurance industry companies deal with the Hobbesian choice?

The answer is hiring the rare find: a communications firm that understands insurance. Too often, however, insurance industry public relations and marketing executives either cannot find this rare breed or do not have the resources to acquire such talent.

As a result, insurance company marketing and communications personnel, along with vendors that offer industry services, end up exploiting and frustrating internal subject matter experts or hiring public relations and marketing companies that provide assistance on the cheap.

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The best Search Engine Optimization approaches
in the world cannot overcome fluffy content
that lacks substance.
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The first approach can become a human resources problem. The second approach could risk your company’s online reputation by publishing materials that will actually turn potential customers away from your business.

This is happening more than the penny-wise and pound-foolish financial professionals want to believe. They don’t understand that potential clients have become more sophisticated and expect more from content, such as insight and problem-solving strategies. I used to write such content full-time as a journalist, but few publications can support expert reporters.

Once potential customers decide to ignore your company’s marketing emails and social media posts, reversing this rejection becomes very difficult. Reputation damage is much more expensive and difficult to overcome than establishing a credible presence in the first place.

Budget Restraints

But Annmarie, you say, true insurance experts who are also schooled in public relations or journalism can be expensive. Sure, they cost more, but you will not be paying for them to become educated about insurance. Further, the expertise of a quality professional should be reflected in the content and marketing strategies.

With a minimal budget, focus on quality over quantity. I have long told my clients that it is better to publish less often and offer higher quality than to publish a lot of junk. What you want is to see your company’s name associated with must-read content.

To produce quality insurance content, re-evaluate all the marketing and communications channels and even cutting back in some areas.

Begin by maximizing the company website. There is no point in investing in social media and other digital marketing approaches if the content bread crumbs will just lead to a unappealing website. The best Search Engine Optimization approaches in the world cannot overcome fluffy content that lacks substance. Then there are the ever-changing Google algorithms that strive to reward the best content available and punish those offering content garbage.

Think about it. You get frustrated by wasting your time on shallow content produced by novices. What makes you think your potential customers are any different?

Evaluate the website and ensure that everything adheres to what I call The Credibility Factor. That means:

  • getting rid of all the fluff and telling your potential customers what they need to know to ease the buying process. Simple websites are more effective than fancy and complicated ones.
  • considering the structure and how often a viewer has to click to find what they really want to know.
  • looking beyond the latest and greatest in design and stick with what works.

Once the website is scrubbed of hype, begin planning magnetic content. To ensure quality insurance content, get started by:

  • creating an editorial calendar.
  • approaching internal subject matter experts and freelance writers with the topics and schedule.
  • producing several evergreen pieces first — just in case the schedule falls through – and it will.

Now that your company’s website is top notch, your content rocks and your blogging schedule is consistent, return to social media one venue at a time. As you offer online content breadcrumbs, you want them to lead to your company’s website and ultimately its call to action piece.

For commercial lines customers, you’ll get better results from LinkedIn and Twitter than Facebook. Make sure you have maximized both before moving forward to Facebook. As a tip, I am amazed at how many visitors I get from Google Plus. Be creative on how to use other social media sites. Personal auto and homeowners’ insurers can benefit from Pinterest and Snap Chat with the right approach.
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Get rid of all the fluff
and tell your potential customers
what they need to know to ease the buying process.
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Once you have established substantive content, you can repurpose it as the core of what must be a fascinating and engaging video.

Personally, I am not a fan of videos. Since younger audiences like to watch videos, I am including them.

Here’s why I give them a lower priority. First, I can read faster and would rather not spend two-to-three minutes on a video. Second, videos tend to be very superficial. Video production is not cheap and it requires another set of expertise to be effective.

And finally, please do not produce another boring “teaching” video that mimics a typical classroom experience. The video must personify your company’s brand and insurance is already considered boring enough.

Do you agree with my blog or would you care to share one of your own best practices? Please let me know by responding in the comments section or contact me directly at annmarie@lipoldcommunications.com.

 

 

 

 

 

 

 

 

 

 

 

 




Staying Afloat: Flood Insurance Is A Taxpayer Burden

Screen Shot 2013-07-01 at 3.58.35 PMThe National Flood Insurance Program (NFIP) is in debt. About $24 billion in debt to be exact. It’s part of the larger debt we taxpayers are carrying because the program cannot collect what it needs to pay flood claims.

But before you get bent out of shape about another tax burden, consider this. The program is in trouble because most Americans are not buying flood insurance or paying premiums as they should. To make matters worse, more major weather events are predicted this year and in the future.

I cover this in my latest article, The Perilous State of Flood Insurance, in Contingencies magazine. Published by the American Academy of Actuaries, it provides a detailed account of the NFIP since Superstorm Sandy and reform signed into law by President Obama last year.

Here’s some highlights.

  • The NFIP, which is part of the Federal Emergency Management Assistance program (FEMA), which is under the Department of Homeland Security, is just one major CAT event away from hitting the debt ceiling that President Obama and Congress extended last January. That CAT could easily happen this hurricane season, weather experts predict.
  • The 45-year-old NFIP exists because the private insurance market cannot afford to offer flood coverage. Private insurers (your State Farms, Allstates and Progressives of the world) would need to double premiums currently paid by NFIP policyholders due to state solvency requirements.
  • Flood damage is way underinsured. Just ask the folks in New York and New Jersey who did not have NFIP coverage. For their policyholders, NFIP covered about $7.2 billion in losses. The insurance industry as a whole picked up even more for commercial property and business interruption coverage. Those who were not covered, did not get a FEMA grant or charitable help were out of luck. Some people are still homeless because they missed the boat on having flood coverage.
  • People do not buy flood insurance for many reasons. They either assume flood protection is covered through homeowners and renters insurance or say they cannot afford to buy it. (My grandmother used to say that if you cannot afford to take care of soemthing, you shouldn’t have it.) Some even hold out hope that they will get FEMA grant money, which of course, are more federal tax dollars at work.
  • FEMA is releasing new flood maps that might be putting your home or commercial building into a flood zone. That’s because climate change means sea levels and major weather events are rising, which puts more of the U.S. population at risk for flood damage. Better measuring instruments are making maps much more accurate as well.I hope you will enjoy my article. Even if you do not read it, I hope you will call your insurance agent and make sure you are covered. It’s the right thing to do.

For more information on insurance and deciding what kind of insurance you need, check out the Insurance Information Institute. They exist to keep consumers informed.

The Perilous State of Flood Insurance can also be found under “Work Samples.”